* Disney cuts cable unit profit forecast, stock slides
* First Solar rallies after earnings, guidance
* Dow flat, S&P up 0.4 percent, Nasdaq up 0.8 percent (Updates to early afternoon)
By Tanya Agrawal
Aug 5 (Reuters) - The S&P 500 and Nasdaq Composite rose on Wednesday following three days of losses as tech shares advanced, while the blue-chip Dow index was flat, weighed down by Disney's largest daily drop in seven years.
Gains in major tech companies Google, Facebook and Apple led the advance on the Nasdaq. The S&P 500 tech sector gained 1.2 percent, its best performance in three weeks.
Earnings in the technology sector of the S&P 500 are expected to have grown 5.3 percent in the second quarter, up from a 2.1 percent increase expected back on July 1, according to the most recent Thomson Reuters I/B/E/S data.
"There's been a sector rotation into technology because of the improvement in their earnings expectations," said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.
He said , however, the market's move is "a modest bounce back after discernable pressure over the last trading sessions."
He cited deceleration in the Chinese economy as an ongoing headwind for stocks, specifically commodities-related sectors.
Disney's shares fell to $110.33, a 9.3 percent drop and the largest for any day since Dec. 1, 2008, after it cut its profit forecast for its cable networks unit, spooking the entire industry.
Shares of Comcast fell 4.7 percent, Discovery Communications lost 13.2 percent and Twenty-First Century Fox fell 7.1 percent. Disney's shares are still up 17xx percent year to date, compared with a gain of x percent on the S&P 500.
"Disney has had such a tremendous move in the past months that a setback within the stock price should not be a surprise," said Morganlander.
At 3:36 p.m. EDT (1936 GMT) the Dow Jones industrial average was up 2.78 points, or 0.02 percent, to 17,553.47, the S&P 500 had gained 7.78 points, or 0.37 percent, to 2,101.1 and the Nasdaq Composite had added 38.25 points, or 0.75 percent, to 5,143.79.
U.S. private job growth slowed in July but a surge in services industry activity to a near-decade high suggested solid economic momentum that strengthens the case for a Federal Reserve interest rate hike this year. Friday's payrolls report is key for traders who are trying to anticipate the Fed's next move.
Shares of Chesapeake Energy tumbled 14.3 percent to $6.86 on worries about hefty debt and spending at the No. 2 U.S. natural gas producer.
First Solar shares jumped 17.2 percent to $52.14 a day after it reported sharply higher quarterly sales and earnings and said results for the year would top Wall Street estimates.
Declining issues outnumbered advancing ones on the NYSE by 1,530 to 1,501, for a 1.02-to-1 ratio on the downside; on the Nasdaq, 1,650 issues rose and 1,150 fell for a 1.43-to-1 ratio favoring advancers.
The benchmark S&P 500 index was posting 54 new 52-week highs and 31 new lows; the Nasdaq Composite was recording 132 new highs and 98 new lows. (Reporting by Rodrigo Campos; Editing by James Dalgleish)